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The Coming Shortage Of Physical Gold That Will Change Everything

Gold Is the paper gold scam about to be brutally crushed by a crippling shortage of physical gold?  If so, what will that do to global financial markets?  According to the Reserve Bank of India, “the traded amount of ‘paper linked to gold’ exceeds by far the actual supply of physical gold: the volume on the London Bullion Market Association (LBMA) OTC market and the major Futures and Options Exchanges was OVER 92 TIMES that of the underlying Physical Market.”  In other words, there is a massive amount of paper out there, but very little actual physical gold to back it up.  And right now, we are witnessing voracious hoarding of physical gold all over the globe.  This is especially true in Asia.  Just see this article and this article.  All of this hoarding is putting a tremendous amount of pressure on those that have made all of these “paper promises”, because the truth is that there really isn’t all that much physical gold on the planet.  In fact, Warren Buffett once estimated that if all of the gold in the entire world was brought into one place, it could be formed into a cube that would only be 69 feet long by 69 feet high by 69 feet wide.

As the emerging shortage of physical gold becomes increasingly apparent, the massive Ponzi scheme that the bullion banks have been running for decades is going to completely fall apart.  The following is what Egon von Greyerz told King World News the other day…

Governments and central banks have, for decades, leased or sold their gold to the bullion banks.  So they are very likely to own very little of the 23,000 tons that Western central banks are said to hold.

But now bullion banks also have a problem:  They tried to replenish their (physical gold) coffers during the massive manipulative selling that we’ve seen over the last few months in the paper market.  Although they took the price down, most of the physical (gold) that was released by selling from ETFs and hedge funds was absorbed by Asia.

 So the bullion banks are still massively short of physical gold.

Right now there simply is not enough physical gold out there and the bullion banks and the central planners are starting to panic.  One of the individuals that really has his hand on the pulse of what is going on is billionaire Eric Sprott

We have seen the COMEX inventories decline rapidly. We know that all of the dealer inventory on the COMEX has already been spoken for by delivery notices, so essentially there will be zero (inventory) if they ever make the delivery.

And the central planners (also) went to India and said, ‘Look, you’ve got to do something about all of this gold buying in India.’ So we’ve had ten different steps by the Indian government to try to curb demand — a 2% tax, a 4% tax, a 6% tax, an 8% tax, and a ruling that banks couldn’t lend money for people to buy gold.

They also convinced the Jewelers Association that as of July 1st they couldn’t sell gold bars and coins. Just last week there was a new rule implemented that if you are importing gold you have to prove that a certain amount is being re-exported. We’ve probably had ten or twelve things (restrictions) happen in six months, all of which is a huge attempt to get the second biggest buyer of gold in the world, after China, to decrease consumption because the gold isn’t around.

The central planners have arranged all of these things. I think it’s just been one big scheme to try to get people dissuaded from owning gold and to cause supply to come out. As you mentioned, because of it (central planner actions) we have the gold forward rates (for gold) being negative, backwardation, and inventories plunging, all of which have been manifested because there is a shortage of gold.

Already the emerging shortage of physical gold is starting to cause some very unusual things to happen in the financial markets.  A recent article by Reg Howe did a good job of explaining what we have been witnessing lately…

By undercutting normal gold lease rates, these super low interest rates have forced central banks to reduce their lease rates to nonsensical levels in order to prevent gold futures from going into overt backwardation. Recall that GOFO, the gold forward rate, is the interest rate for a given maturity less the lease rate for that maturity, and that a negative GOFO represents backwardation. See Gold Derivatives: GLD and Ass Backwardation (5/24/2010); Gold Derivatives: The Tide Turns (5/25/2009). Passing the argument that widely reported premiums for spot physical delivery represent a form of backwardation, figures from the LBMA have now shown a negative GOFO at the shorter maturities for almost three weeks (July 8 through July 25) due to a surge in lease rates, which still remain below more normal historical levels.

Indeed, this unusual event has attracted considerable attention even from those outside the narrow world of gold. See, e.g., J. Skoyles, Backwardation, negative GOFO and the gold price, The Real Asset Co. (July 24, 2013); M. Kentz, Gold futures hiccup indicates demand outpacing supply, Reuters (July 19, 2013); G. Williams, What If, Things that Make You Go Hmmm, Mauldin Economics (July 15, 2013).

The bottom line is that there is a very serious shortage of physical gold, and as this becomes increasingly apparent to the rest of the world, this is likely to cause a tremendous amount of instability in the financial markets in the months ahead.

For much more on this, please see the recent interview with Alasdair Macleod of goldmoney.com that is posted below…

Right now we are also witnessing tremendous demand for physical silver as well.

For example, the U.S. Mint is going to break the all-time record for July by a very wide margin, and it is being projected that sales of Silver Eagles will likely be above 45 million for the entire year.

And remember, unlike gold, silver is used in thousands of different consumer products.  So silver is continually being used up and taken out of the overall global supply.

If silver continues to be used at the current rate, eventually the global supply would be whittled down to almost nothing.  And right now, it appears that the industrial demand for silver is rising substantially.  For instance, a recent article by David Franklin and David Baker described the massive amount of silver that is going to be required by Japan and China as they move very heavily into solar power over the next few years…

With 5.3 gigawatts of new capacity in Japan in 2013 and up to 30 gigawatts added in China over the next three years, the solar industry could potentially have a big impact in the silver market. Silver is a key component in solar panels due to its unique electrical conductive properties, with approximately 80kg of silver required to generate 1MW of electricity. According to the Silver Institute, one megawatt of solar power requires as much as 2.8 million ounces of silver. China and Japan’s solar projects combined will add up to 27 gigawatts over the next three years. This capacity will require approximately 91 million ounces of silver, which means that China and Japan’s new demand could consume up to 11% of global mine supply – and that’s if the world produces as much silver as it did in 2012.

Silver used in solar panels cannot be recycled and therefore disappears from the world’s silver stockpile. If China and Japan can follow-through with their respective solar programs, the silver market could benefit significantly.

So what does all of this mean for you?

What it means is that while we may see wild fluctuations in the prices of gold and silver over the short-term, the long-term prognosis for both metals is absolutely fantastic.

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  • Rodster

    This is just one of the many artificial bubbles created by TPTB. I’ve been a long time believer that it won’t be a specific date that throws the global economy into chaos but some type of an event that lights the fuse. This could be one of them.

    It also makes you think why China and Russia are buying and hoarding gold at a massive rate? It probably has to do with the limited supply of the metal, but they and the Russians would probably use it to back a new reserve currency they wish to create, to replace the $USD.

    I’ve felt for quite some time that there isn’t as much available gold as we are led to believe. When the US told Germany it would be years before they got their gold back and were not allowed to inventory the gold, I knew their gold was either probably leased or sold.

    • Nexusfast123

      Not sure what you mean by ‘artifical’. All bubbles have the same genus.

  • Dave Webb

    I suggest that we need to put gold mines to work. My own studies show that where ever the plates overlap is where gold may be found in abundance. The Pacific coast from Alaska all the way to Argentina is the most likely places that gold will be found in abundance.
    The theory(not mine) is that the mantle actually has a layer of gold in a semi-molten state and that when the crusts of the Earth smash into one another then you have a serious amount of volcanic activity. This in turn pushes that gold layer to the surface. This leads me to believe the layer might be universal enough that where ever you have tall mountains in unstable earthquake zones, you might have layers of gold in the mountains themselves.
    By that standard both California and Alaska could have a substantial amount of undiscovered gold. The Rocky Mountains might have a lot of gold in them. But I think the coastline is probably more likely.
    I guess that is what we pay geologists big money to figure out. For Gold to be mined, it must be profitable. I suggest we are looking at $2500-3000 an ounce somewhere down the road. When gold goes over $2000 an ounce then you might see all kinds of sources come into play.
    If I were the US Government and was faced with a problem with the books on gold, I would be mining for all I was worth to bring the books back into balance. I would suggest tax free mining as a temporary solution to the problem.

  • chris

    And who is regulating this market? No one by the looks of it, odd……

  • BF

    In the Bible it talks about people throwing even their gold and silver into the street right before the end times. We are getting close everyone. All the signs are in place especially with Comet ison preceding the four blood moons with a solar eclipse in the middle. We are warned.

    • Gay Veteran

      don’t you bible thumpers ever take a break???
      the article is about the gold market

      • Rodster

        Too funny :)

      • http://www.facebook.com/people/Kathryn-Leal/100001477955995 Kathryn Leal

        Thump thump, thump thump. Don’t you homosexuals get tired of forcing others to keep silent while you parade around like a clown?!?!

        • Gay Veteran

          sorry darling, but parroting bible verses when the story is about gold is simply silly.
          And who is being FORCED to keep silent? and clowns? you obese hets are the clowns

    • Jim Davis

      We have been “getting close” ever since I can remember. You Revelations-types are like the boy who cried wolf.

      • j r

        Especially around gold and silver. The outcome is fantastic…until it gets confiscated.

      • bob cratchette

        you actually think the govts around the world are going to let gold and silver become legal tender again you are crazy they want to control you and can only do this by what they deem as legal tender to buy goods and services, yes we may be crying wolf now but rest assured it is on its way, bible said there would be mockers in the last days so your comment is proof, if you cant see the whole world going to pot you are either ignorant or blind, the antichrist will make it a crime to use gold and silver so it will be worthless at that point and all these people that have put their trust in their hoarded riches will be devastated, not sure what they will be doing if it will be sa one world currency or a credit type system but if you are here during that time i guess you will find out and it will stink to be you as for me and many others will be long gone so open your eyes as to what is happening in the world around you not just this attitude of most americans that all there is, is america because dark days are coming for what is left of this once great country believe or dont believe but you do it at your own peril, bible says, what should it gain a man if he gains the whole world but loses his own soul, doesnt amtter whether you believe it or not you will spend an eternity in one place or the other the choice is yours alone to make

    • billy bob

      Please let me know where you live an when you gonna start tossing.

  • Nexusfast123

    Another bubble fit to burst. It is really down to which one goes first…gold…bonds,,,etc.

  • Don_in_Odessa

    I keep seeing all these stories about gold. Shortages, high prices, skyrocketing premiums, anything and everything to nourish the notion that you better get it now.

    I have to buy a small amount of gold every month for my small business. I have had no problem getting it and the percentages charged as the premium are the same as they have always been.

    I am not saying to stop buying the stuff. It is a hard asset and if or, when high inflation hits, the price will rise as well. But, sheesh! Tone down the fear mongering a bit with a little bit of reality. Even my own supplier says he has had no problem buying it and they buy it by the pound.

  • Don_in_Odessa

    No need to educate with more words when I have actual experience. Additionally I said do not stop buying. I do believe it is a good investment in todays market.

    Like I said I am not experiencing the shortages or higher premiums that people keep yacking about. My premiums have been about 10% over market for alloy (not the pure stuff) for 30 years. That is for silver alloys, palladium alloys and gold alloys for my business. And, I have never had a problem with getting what I need on a monthly basis.

  • victoriacoinexchangeny

    The gold prices are spiking but viewing its value it seems almost overbought. High demand to own and invest to the gold have been making people hold it for long term basis. Even though it’s decided as a valuable thing that survive in any condition but if it’s owned by all people, it must be not passionate again. And only time will tell when people will leave it and shift to another commodities.